Beech Nut Case Study on Ethics

Topics: Apple, Apple juice, Apple cider Pages: 5 (1882 words) Published: February 23, 2010
Beech-Nut a distributor of apple juice in the competitive baby food industry started purchasing apple juice concentrate from a supplier called Universal Juice Company in 1977. There should have been questions at that time because Universal Juice sold its product at around 25 percent below the market value for apple juice. John Lavery the vice president of operations received his first indication in 1978 that the apple juice concentrate from Universal might be adulterated but ignored the warnings from Dr. Jerome LiCari, Beech-Nuts director of research (Starr, 1989). Then in 1979, outside laboratory tests and an unsolicited report from a Swiss laboratory determined that the apple juice was adulterated (Starr, 1989). With each repeated occasion no action was taken by Beech-Nut until in June 1982 when private investigator, Andrew Rosenzweig, who had been hired by the Apple Processors Trade Association, provided proof that the apple juice was an adulterated concentrate (, 2009). Beech-Nut terminated their relationship with Universal when it was informed that it would be included in the lawsuit against Universal for distributing adulterated concentrate. The decision and action taken by Lars Hoyvald, the CEO of Beech-Nut has had ramifications immediately and several years later. Thomas H. Roche an Assistant United States Attorney stated the action Hoyvald took was a case of corporate greed and irresponsibility (Buder, 1988). In consideration of Hoyvald’s actions the following questions will be discussed: 1. If a recall would have required closing down the company, is avoiding a recall a risk worth taking? 2. If the apple juice is safe was the public harmed in any way? What about foreign countries? Beech-Nut 3

3. Is Hoyvald’s conduct representative of a CEO? Was he doing his job in difficult circumstances and what Nestle expected of him? 4. Should Nestle have kept the two executives on the payroll and paid their legal expenses? When Hoyvald was questioned why he did not act more decisively, he stated that a recall would ultimately cause the closing of Beech-Nut (Boatright, 2007). Would have avoiding a recall been a risk worth taking? In the perspective of Beech-Nut the answer to this question is yes because Beech-Nut willingly and intentionally distributed the phony apple juice since 1978 (Buder, 1986). When Nestle purchased Beech-Nut in 1978, Beech-Nut's director of research and development, Jerome LiCari, went to senior management to warn them of problems with the concentrate, which further testing had again proven to be suspect (, 2009). Niels Hoyvald became CEO of Beech-Nut in April 1981 and knew in January 1981 while he was senior vice president in charge of marketing that the apple juice was adulterated (Buder, 1988). The point I’m making is if the truth is exposed Beech-Nut will be implicated in intentionally distributing adulterated apple juice so the company might as well take a chance on covering up. Beech-Nut had been in financial trouble and Nestle was expecting a $7 million dollar profit. The cost to Beech-Nut for the recall is $750,000 more for each year for a different supplier and $3.5 million for the recall. The employees at Beech-Nut would have lost their jobs and at that time United States was just coming out of a recession. Conducting the recall would be restoring public trust in Beech-Nut by the people, and the state and federal investigators. In Beech-Nut’s perspective the monetary cost would outweigh the benefit of gaining public trust. Therefore looking at only what was known at the time by Beech-Nut I can understand their rationale for choosing to cover up the phony apple juice scam. It would have been different if they only found out that the apple juice was adulterated in June 1982 then a recall would have been cost effective. Then they would only be liable for 3.5 million. Beechnut knew that...

References: Boatright, J (2007). Ethics and the conduct of business. Upper Saddle River, New Jersey: Pearson Education Inc.
Buder, L (1988 Feb 18). 2 former executives of beech-nut guilty in phony juice case. Retrieved January 20, 2009, from The New York Times Web site:
Gordon, A (1988 June 17). How beech-nut succumbed to fake apple of temptation. Retrieved January 20, 2009, from The Library Your Document Web site:
Parks, J (2005). Boron in the environment. Retrieved January 20, 2009, from Wikipedia Web site:
Starr, K W (1989 October). Write of certiorari to the United States Court of Appeals for Second Circuit. Retrieved January 20, 2009, from No 89-216 Web site: http//
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